Date: 20081119
Docket: T-1236-01
Citation: 2008 FC
1271
Ottawa, Ontario, November 19, 2008
PRESENT: The Honourable Mr. Justice Mandamin
BETWEEN:
WEATHERFORD ARTIFICIAL LIFT
SYSTEMS
CANADA LTD. WEATHERFORD CANADA PARTNERSHIP,
EDWARD GRENKE AND GRENCO INDUSTRIES LTD.
Plaintiffs
and
CORLAC INC., NATIONAL-OIL WELL
CANADA LTD.
and NATIONAL OIL WELL INCORPORATED
Defendants
REASONS FOR JUDGMENT AND
JUDGMENT
[1]
The
Defendants sought an Order granting them leave to amend their Statement of
Defence and Counterclaim to seek a declaration that stuffing box models
purchased from a third party, SAI Hydraulics Ltd., and sold by the Defendant
National-Oil Well Canada Ltd. do not infringe a patent held by the Plaintiffs.
[2]
By Order
dated June 9, 2008, Prothonotary Lafrenière denied leave to amend the Statement
of Defence and Counterclaim as sought by the Defendants. The Defendants appeal
the Prothonotary’s Order to this Court.
BACKGROUND
[3]
The device
known in oilfield parlance as a stuffing box is an assembly for restraining oil
leakage in rotary oil well pumps. In a consolidated action, filed on May 8,
2007, the Plaintiffs allege, among other things, that the Defendants made,
constructed, used, offered for sale, and sold drive systems which included
rotating stuffing boxes that are claimed and described in Canadian Letters
Patent No. 2,095,937 (the ‘937 Patent) held by the Plaintiffs. The original
Statement of Claim for infringement in this action dates back to July 6, 2001.
[4]
The
Plaintiffs’ claimed for a declaration that the ‘937 Patent is valid and that
the Defendants have infringed the Plaintiffs’ Patent. The Defendants, in their
Statement of Defence and Counterclaim, allege the ‘937 Patent is invalid and
counterclaimed for a declaration of invalidity.
[5]
Examinations
for discovery were held prior to and subsequent to consolidation. By Orders of
Associate Chief Justice Lutfy, dated January 21, 2003, and November 2, 2004,
the action has been under the case management supervision of Justice Hugessen
with the assistance of Prothonotary Lafrenière. On May 8, 2008, Justice
Hugessen issued a direction specifying the trial in this matter would be held
for a period of five weeks beginning in the spring of 2009. The trial is
scheduled to commence April 20, 2009.
[6]
During the
course of Examinations for Discovery a question came up about SAI Hydraulics Canada stuffing boxes (SAI Stuffing
Boxes) that were being purchased and resold by the Defendant National Oil Well
Canada Ltd. The SAI Stuffing Boxes became the subject of more focussed
examinations for discovery by both the Plaintiffs and Defendants. The
Plaintiffs took the position that the SAI Stuffing Boxes were not included
within the scope of the Statement of Claim.
[7]
On April
22, 2008, the Defendants served a copy of the proposed Amended Statement of Defence
and Counterclaim on the Plaintiffs and asked the Plaintiffs to either consent
to service and filing of the proposed Amended Statement of Defence or admit the
SAI Stuffing Boxes did not infringe the ‘937 Patent. The Plaintiffs declined
to agree to either option.
[8]
On May 5,
2008, the Defendants filed a Notice of Motion for leave to serve and file an
Amended Statement of Defence and Counterclaim that included a request for a
declaration that the SAI Stuffing Boxes sold by the Defendant National Oil Well
Canada Ltd. do not infringe the claims of the ‘937 Patent. The proposed amendments
were:
a.
Statement
of Defence: 17A. As to paragraph 35 of the Claim, the Defendants deny the
Plaintiffs’ allegations of infringement. In particular, National Oilwell
Canada Ltd. is purchasing certain pressurized stuffing boxes from a third
party, SAI Hydraulics Canada Inc., (“SAI Stuffing Boxes”) and the Defendants
specifically deny that the SAI Stuffing Boxes infringe the claims of the ‘937
Patent.
b.
Counterclaim:
26. (b): A declaration that the SAI Stuffing Boxes do not infringe any of the
claims of the ‘937 Patent.
THE DECISION UNDER APPEAL
[9]
On June 9,
2008, Prothonotary Lafrenière issued an Order dismissing the Defendants’
application for leave to serve and file the Amended Statement of Defence and
Counterclaim.
[10]
The
Prothonotary, after noting the written and oral submissions of the parties,
wrote:
“And upon confirmation by Counsel for the
Plaintiffs that certain stuffing box models were purchased from SAI Hydraulic
Ltd. and sold by National-Oil Well Canada Ltd. are not part of this action that
no relief is being sought relating to these stuffing boxes as part of the
upcoming trial.”
[11]
The
Prothonotary dismissed the Defendant’s Notice of Motion for an Order granting leave
to serve and file an amended Statement of Defence and Counterclaim.
The Issues
[12]
I consider
the issues in this appeal to be as follows:
a. What is the appropriate standard
of review of the Prothonotary’s decision?
b. Considering the standard of
review, should paragraph 2 of the June 9th Order be set aside and
leave be granted to the Defendants to serve and file the proposed Amended
Defence and Counterclaim?
The Standard of Review
[13]
In Canada v. Aqua-Gem Investment Ltd., [1993]
F.C.J. No. 103, Justice MacQuigan set out the
proposition that
“discretionary orders of prothonotaries
ought not to be disturbed on appeal to a judge unless:
(a) they are clearly wrong, in the sense that
the exercise of discretion by the prothonotary was based on a wrong principle
or upon a misapprehension of the facts, or
(b) where they raise questions vital to
the final issue of the case.”
Justice MacQuigan went on to decide that where the
prothonotary has made an error of law a judge ought to exercise his discretion de
novo.
[14]
The
standard of review was further considered in Merck & Co. v. Apotex Inc., 2003 FCA 488, where the test was reformulated by, where Justice
Robert Décary for the Federal Court of Appeal stated:
…the
test should be slightly reformulated to read: discretionary orders of
prothonotaries ought not to be disturbed unless (a) the questions raised are
vital to the final issue of the case, or (b) the orders are clearly wrong as
based upon wrong principle or misapprehension of the facts.
[15]
If the
question raised is vital to the final issue of the case, the reviewing judge
should engage in a non-deferential de novo standard of review.
analysis
[16]
The Defendants
submitted that the Prothonotary erred by permitting the Plaintiffs to limit the
scope of the action notwithstanding the Plaintiff’s claim in paragraph 35 which
states:
35. The full extent and nature of the
acts of infringement of the ‘937 Patent by National-Oilwell and Corlac is
unknown to the Plaintiffs, but is known to National Oilwell and Corlac. The
Plaintiffis claim relief in respect of all acts of infringement committed by
National-Oilwell and Corlac.
[17]
The Defendants
submitted that they were seeking to clarify the scope of the action and ensure
all allegedly infringing products were included, specifically the SAI Stuffing Boxes.
They submit that the Prothonotary, by denying their application to amend,
decided on an issue vital to the final issue of the case. The Defendants
submit this Court must review the application to amend on a de novo basis.
[18]
The Defendants
rely on the case in Merck & Co. v. Apotex Inc., [1999] F.C.J. No.
2022 (CA) (Merck), for the principle that the general language of
infringement in a statement of claim does not limit a claim to enumerated
products.
[19]
I do not
see that paragraph 35 of the Statement of Claim supports the Defendants’
interpretation. Paragraph 35 immediately follows a listing of particulars of
the alleged infringement. A fair reading of the paragraph leaves open an
interpretation that paragraph 35 is a saving paragraph in respect of particulars
alleged in the Plaintiffs’ pleadings instead of an interpretation that paragraph
35 is a claim concerning new unknown products.
[20]
Further, a
statement of claim based solely on paragraph 35 without an allegation of
material facts necessary to show a cause of action for infringement would be
deficient. Paragraph 35 in itself cannot serve as a valid claim in that it is
devoid of any material facts linking the claims to infringement activities
relating to the SAI Stuffing Boxes. Harrison v. Sterling Lumber Co.,
2008 FC 220, at paras. 20 – 23.
[21]
The Defendants
also argue that the doctrine of res judicata requires that they are
required to bring forward their whole case. If they do not, they assert they may
be subject to a second action by the Plaintiffs in respect of the SAI Stuffing
Boxes.
[22]
The Defendants’
submission with respect to the doctrine of res judicata is that it
protects defendants from having to defend themselves from a second round of
litigation. Res judicata, however, works in the Defendants’
favour and not to their disadvantage, since it is the Plaintiffs who are
restricted from re-litigating their claim should they fail to advance a related
claim that they should have. Merck at para. 13.
[23]
The
exclusion of the Defendants’ counterclaim for a declaration of non-infringement
arises as a result of a court order, namely the Prothonotary’s Order of June
9th. The factors identified in Merck, lack of diligence, negligence,
inadvertence, or accident, are not applicable in this circumstance. In my
opinion, the Defendants did not fail to exercise diligence or negligence such
as to give rise to an issue of res judicata should they exercise their
right to seek a declaration of non-infringement.
[24]
Moreover,
the Defendants would not be restricted from raising a counterclaim for
non-infringement should they be sued by the Plaintiffs in a subsequent action for
infringement of the ‘937 Patent with respect to the SAI stuffing boxes since
the right to seek a declaration derives from a legislative basis, section 60(2)
of the Patent Act. I do not see that the doctrine of res judicata would
preclude the Defendants from exercising a statutory right to seek a declaration
of non-infringement in the course of any future defence for a device that was
not the subject of prior litigation.
[25]
Given the
foregoing, I do not consider that the Prothonotary decided on an issue of vital
importance to the final issue in this case. As a result, I consider the
Prothonotary’s Order to be discretionary in nature.
[26]
The role
of a case management judge was discussed by Justice Rothstein for the Federal
Court of Appeal in Sawridge Band v. Canada, 2001 FCA 338 , at para. 11. He
stated:
“We would take this opportunity to state
the position of this Court on appeals from orders of case management judges.
Case management judges must be given latitude to manage cases. This Court will
interfere only in the clearest case of a misuse of judicial discretion.”
[27]
Justice
Gibson in Microfibres Inc. v. Annabel Canada Inc., 2001 FCT 1336, considered the role of
Prothonotary to be of similar importance. He stated:
“I conclude that Mr. Justice Rothstein’s
comments should apply by analogy to discretionary decisions of prothonotaries
made in the course of case management in complex matters such as this. Case
management prothonotaries must be given latitude to manage cases in the same
manner in which case management judges are entitled to such latitude.
. . . Case Management prothonotaries,
like case management judges are familiar with the proceedings that they are
managing to a degree that a trial judge, sitting on appeal from a
prothonotary’s discretionary decision in such a context, usually cannot be.”
[28]
In my
view, the Prothonotary was exercising his discretion in making a case
management decision when he decided against the Defendants’ application for
leave to serve and file the Amended Statement of Defence and Counterclaim. He
was familiar with the course of the proceedings and the procedural complexities
involved in the action. He was doing so in a consolidated action that had been
before the Court for six years and that had been ordered to proceed to trial on
a certain date.
[29]
I cannot
conclude that the Prothonotary clearly erred by deciding on a wrong principle
or upon a misapprehension of the facts when he made his Order.
[30]
The
Defendants’ appeal of the Prothonotary’s Order of June 9, 2007 is dismissed.
JUDGMENT
THIS COURT ORDERS that:
1.
The Defendants’
appeal of paragraph 2 of the Prothonotary’s Order of June 9, 2007 is dismissed;
2.
Costs
shall be in the cause.
“Leonard
S. Mandamin”
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